protection & indemnity · foreseeable trends in underwriting results. the willis p&i...

Protection & IndemnityMarket Review 2002/3

2 Summary4 Market financial commentary

10 Risk of further unbudgeted calls14 International Group re-insurance16 P&I fixed premium market22 Average Expense Ratio (AER) comparisons24 Introduction to Club pages26 Club Financial Pages40 Supplementary call history42 Comparison of original and actual supplementary calls46 Percentage variation from initial estimated total call50 Supplementary call history summary52 Tonnage split by nationality of management54 Tonnage split by vessel type56 General increases

Willis Marine P&I Review, December 2002 1

Contents

Marine P&I Review

Marine P&I Review

The P&I renewal at February 2002 was the first genuinelyhard market for nearly ten years. Premium increasesactually achieved varied from Club to Club, but overall they were between 15 and 20 percent.

Even with the expected significant improvement inunderwriting results for the 2002/03-year it is unlikely thatthe current year will show an overall surplus. Investmentincome is expected to be of limited help as the world'sfinancial markets continue in turmoil leaving little optimismthat investment income will recover in the near future.

Against this background all Clubs will again be looking forsignificant rate increases at the renewal in February 2003.One difference we expect however is that there will be agreater variation in the level of published general increasesacross the Clubs. Although the majority of the market willannounce increases in the region of 25 percent, we expectthree or four Clubs to publish relatively low figures,increases in the region of 15 percent.

Following the expiry of the International Group's three-yearreinsurance deal at the next renewal, reinsurers arepositioning for substantial increases and these costincreases will be applied in addition to the general rises.The Group has various negotiating strategies, including thepossibility of increasing the Pool retention, which may helpto mitigate the final reinsurance cost. At the time ofwriting exact predictions regarding the quantum of risesare impossible, however we expect that reinsurance costswill increase materially and become a far more significantproportion of the overall premium to Shipowners.

Although more and more information about the P&I marketis increasingly available, the quality and practicality of thedata is often questionable. With a certain amount of analysis however this 'background noise' disperses and anumber of patterns emerge:

Variation between Clubs– There are significant differences in relative asset holdings

and free reserve levels between the strongest andweakest Clubs.

– In addition to the disparity in current financial strength,there is also substantial variation in the underwritingtrends between Clubs.

Volatility affecting all Clubs– Investment income fluctuations.– Potential for individual Clubs to experience abnormal

claims results.– Reinsurance cost increases.

Marine P&I Review

2 Willis Marine P&I Review, December 2002

Summary

Despite the apparent variation and potential volatilitywithin the market, it is possible to interpret the marketresults providing a relatively predictable environmentenabling both short-term leverage and effective medium-term planning of entries.

Predictability of Results– Broad predictability of financial results for the market

as a whole.– In spite of greater potential for statistically unusual

claims fluctuations, individual Clubs show distinct andforeseeable trends in underwriting results.

The Willis P&I Reviews over recent years have consistentlyhighlighted the trends in the market and predicted thesegoing forward with some accuracy. In a changing andhardening market the choice of professional advisorbecomes even more paramount to ensure the mostcompetitive sustainable terms are achieved.

This report concentrates primarily on the quantitativeaspects of the P&I market. Even in this limited aim it canonly provide a general overview. The Willis P&I team wouldbe happy to expand in more detail on any issues raised andhow they might affect individual operators.


Marine P&I Review

The financial predictions highlighted in our P&I Review lastyear regarding the expected state of the market havelargely materialised in the Clubs' published financial results.

We expected underwriting deficits to improve marginally,but without any expectation of a significant improvementin investment income levels. We forecast that the marketwould continue to show material overall deficits. The overalldeficit was however expected to be slightly improved onthe 2000/01 year.

There were two factors that were surprising:

1. Investment IncomeThe first was quite the extent of the investment incomeloss. We expected an adverse year, but one close to thealmost neutral investment result in 2000/01. In actualityinvestment income was much worse. Negative resultswere widespread and overall the market investment loss was in the region of US$74 million.

2. Unbudgeted Supplementary CallsThe second factor was the contribution unbudgetedsupplementary calls would have on the underwritingresult. Across the market unbudgeted calls in the regionof US$154 million were allocated to the 2001/02financial year. We predicted supplementary calls would be made over budget, but the quantum wasgreater than expected.

The combination of these two factors, increased marketincome offsetting worse than expected investment losses,lead almost exactly to our expected overall market result.

The forthcoming renewal in February 2003 will again bevitally important to the Clubs as they continue to try topush up premium levels to address not just theunderwriting deficits but also the likelihood of similarinvestment income results for the next reporting period(s).

The figures used in the following sections are collated from all the International Group (IG) P & I Clubs' that wehave consistently included within our P&I Reviews. Theytherefore represent the P & I Market results forapproximately 90% of the world fleet. All the figures arebased on the consolidated financial year results and arein US$,000s.

Marine P&I Review


Market financial commentary

Underwriting results improve marginally

Gross claims levels across the Group have remainedrelatively stable over the last eight financial years.

A number of Clubs continue to comment that the claimstrend appears to be one of the value of individual claimamounts increasing, but the number of claims remainingrelatively consistent.

Despite fairly good claims results in 2001/02, the mediumterm trend gives some support to the theory of increasingoverall claims costs. The broad pattern over the last eightyears is of increasing claims, but this underlying trend is still very gradual.

2001/02 was the first financial period for six or seven years that reported an increased level of premium paid into the market. The premium level however remainedsignificantly lower than was required to break even on a 'gross' underwriting basis.

The graph (bottom left of this page) shows this trend,comparing paid premiums to gross paid claims for thewhole market over the last eight reported financial years ('gross' underwriting result).

The 'net' underwriting result shows the market deficit more clearly.

The graph (bottom right of this page) shows thedevelopment of 'net operating income' compared to 'netpaid claims' (net underwriting result).

We define net operating income as paid premiums lessoperating expenses and reinsurance costs. Net paid claimsare defined as gross claims less reinsurance recoveries.

The combination of improved net claims and increasedpremium income in 2001/02 has lead to an improved,though still significant, net underwriting deficit.


Marine P&I Review

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

Gross Paid ClaimsCalls and Premiums

01/0200/0199/0098/9997/9896/9795/9694/95

US$

000

's

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Net Paid ClaimsOperating Income

01/0200/0199/0098/9997/9896/9795/9694/95

US$

000

's

International Group Development of Calls and Gross Paid ClaimsInternational Group Development of Operating Income Compared to Net Paid Claims

Investment Loss Dramatic

The turmoil in the world financial markets has impacteddramatically on the Clubs' investment income results.

At this point last year, we expected the investment income result for 2001/02 to be around the same sort of break-even level as 2000/01. The actual result wassignificantly worse. Most Clubs reported negativeinvestment income and even the best performing Clubsshowed only nominal returns. Overall the IG marketreported an investment loss in the region of US$74 million.

Consequently the improvement of the market operating/underwriting result was offset by the extremely adverseinvestment loss.

The graph (bottom left) demonstrates the development ofthe Group's underwriting results, the 'OperatingSurplus/Deficit' (the difference between operating incomeand net paid claims) and compares this to the investmentresults amounts for the respective years. The graph alsohighlights the overall surplus/deficit for the market(Operating result plus/minus Investment result).

Underwriting trend not as positive as it appears

The previous graph shows a relatively favourableunderwriting trend, despite extremely adverse investmentresults. The underlying underwriting trend is howeverthrown out slightly by a number of isolated but significantunbudgeted supplementary calls.

The graph, below attempts to show the underlying trend more clearly. In this graph we have extracted theexceptional unbudgeted supplementary calls todemonstrate how the overall underwriting trend for the market would have looked without them.

Clearly the underlying underwriting improvement for themarket was much more marginal than it first appeared.

Marine P&I Review


Market financial commentary (continued)

-500,000-400,000-300,000-200,000-100,000

0100,000200,000300,000400,000

Investment Income

Surplus for Year

Operating Surplus (Deficit)

01/0200/0199/0098/9997/9896/9795/9694/95

US$

000

's

-500,000-400,000-300,000-200,000-100,000

0100,000200,000300,000400,000500,000

Investment IncomeSurplus for Year


01/0200/0199/0098/9997/9896/9795/9694/95

US$

000

's

International Group Underwriting Development International Group Underwriting Development

Asset and Free Reserve Deterioration

The negative overall market result noted above hasnaturally resulted in a material reduction in the Total Assets and Free Reserves within the IG system.

Reviewing the trend over the last eight years, assets and free reserves grew strongly between 1994/95 and1997/98; this growth then slowed and 1998/99represented a high point for the IG. 1999/00 showed amarginal reduction in overall levels. The two most recentyears however have resulted in the reduction of asset levelsby a relatively significant amount. Effectively the marketnow has similar levels of total funds available to pay claimsas they did in 1995/96. Five years of steady growtheliminated by two years of significant deficits.

This trend is highlighted in the two following graphs.They show the development of Total Assets and FreeReserves within the IG market. The first graph attempts to display how the free reserves are constituted by alsoincluding information regarding estimated outstandingclaims and forecast additional calls (in addition to thelevels of total assets and free reserves). The second, inorder to highlight the overall trends more clearly, simplyshows assets and free reserves.


Marine P&I Review

0

1bn

2bn

3bn

4bn

5bn

6bn

Free Reserves

Outstanding Claims

Forecast Additional Calls

Net Assets (Market)

01/0200/0199/0098/9997/9896/9795/9694/95

US$

0

1bn

2bn

3bn

4bn

5bn

6bn

Free ReservesNet Assets (Market)

01/0200/0199/0098/9997/9896/9795/9694/95

US$

International Group Financial Development International Group Development of Assets and Free Reserves

As mentioned earlier, claims levels have been relativelystable over recent years. There is a consensus from variousClubs that the quantum of individual claims is increasing.There is also some evidence from the financial results that the overall market level of claims are edging upward.It is not expected that there will be a dramatic increase,however a continued gradual increase in total claims looks likely.

The renewal at 20 February 2002 experienced the first genuinely hard market for nearly ten years. Premiumincreases obtained varied from Club to Club, but overallthey were probably in the 15 percent to 20 percent range.We would therefore expect the underwriting result for thecurrent 2002/03 year to show a significant improvement onthe previous year.

No one is being optimistic about investment income for the2002/03 year. The world financial markets continue inturmoil, with no obvious safe investment environment.The Clubs continue to try to amend their investmentstrategies in an attempt to deal with the current worldfinancial climate. Despite the pessimism therefore wewould still hope for slightly better investment incomeresults for 2002/03 than were achieved in the previousyear. There is unfortunately still no expectation thatinvestment income will return to the same sort of levelsseen in the mid/late 1990's, in the foreseeable future.

It is unlikely that even the expected significantimprovement in underwriting results will be sufficient toprevent the 2002/03 year also showing an overall marketdeficit. However, we would expect this overall deficit to be substantially less than in 2001/02.

As mentioned in our market review last year, in terms oftotal Assets and Free Reserves within the market, the1998/99 year represented a 'high point'. Since then wehave seen three years of increasing deterioration. Lookingforward, the results for 2002/03 will probably show afurther weakening of the market asset position, though bya much smaller margin than experienced in 2001/02.

Within the market individual Clubs have varying abilities to absorb such deficits. Already we have seen some of the less well-reserved Clubs resort to unbudgetedsupplementary calls. As the current year looks likely to also end with an overall deficit this will inevitability putfurther pressure on the market. Clearly the next couple of years will become critical to the long-term viability ofcertain Clubs.

Marine P&I Review


Market financial commentary (continued)Future trends

We have mentioned over the last two years, and it is justas valid this year, that unless the Clubs can increase overallpremium levels, it will not be too long before the depletionof Assets becomes a major problem.

The P&I market at the forthcoming renewal will also have the challenge of increased reinsurance costs.At the moment it is difficult to predict with any accuracy the outcome of the renewal negotiations of the IG reinsurance program. The reinsurers and the Clubs are currently positioning themselves withdiametrically opposite statements, prior to the start of any formal discussions.

It is certain however that the reinsurers will want to takeadvantage of this renewal to also make up for the higherincreases they could not apply last year. The IG by contrastare signalling their willingness to consider increasing the IG retention to mitigate any excessive increases.

All Clubs are intimating that they will again be looking for significant rate increases at the renewal in February 2003.There will however probably be a greater variation in thelevel of published general increase across the Clubs thanwas seen at the last renewal. Three or four Clubs areexpected to publish relatively low figures (in the region of10 to15 percent increases) with the majority of the marketin the region of 25 percent. Some of the weaker Clubs maywant to exceed this level, however we do not expect themto stray too far from the market average. IG reinsurancecost increases will almost certainly be in addition to theseretained income increases.

The P&I market needs to address the financial results at theforthcoming renewal and significant general increases arelogical. However, with a continuing adverse economic climate, poor freight market and increasing costs fromother areas already impacting on Shipowners' income,further premium rises will again be fiercely resisted.


Marine P&I Review

The renewal at February 20, 2002 was the 'hardest' that the P&I market has seen for 10 years.

Individual Clubs took remarkably similar approaches to therenewal. Over the last five or six years, in spite of relativelynarrow variations in general increase levels, the degree offlexibility from the 'general' position varied widely betweendifferent Clubs. By contrast at the 2002 renewal the vastmajority of Clubs took a very firm line in trying to attaintheir published general increases and consequently thediscrepancies in the market were much less.

September 11 was certainly a catalyst in the speed of thehardening of the market, but it was not the underlyingcause. As highlighted in the previous section the market as awhole has reported pure underwriting deficits since 1995/96.Despite this premium levels fell year on year from 1994/95to 2000/01. Over the same period claims remained relativelystable. Investment income was able to compensate for these'technical' deficits until 1998/99, however for the last threeyears the market has experienced overall losses and resultantdeterioration in the asset base.

Clearly in a mutual market this situation is unsustainable.The weaker Clubs have already been forced to resort tocharging unbudgeted supplementary calls to maintain their free reserves at an acceptable level.

The questions in the mind of many shipowners are whether this is the end of the story for these Clubs andindeed will other Clubs follow with similar problems? Is the mutual P&I market experiencing a repeat of the late1980's, early 1990's when the vast majority of the Clubshad to make excess calls, or are the current Clubs indifficulty 'isolated incidents'?

Are the recent unbudgeted supplementary calls the tip ofthe iceberg or just three individual Clubs under-performing?

In our view it is very unlikely we will see the majority of themarket resorting to unbudgeted supplementary calls as inthe late 1980's. With so much market-wide pessimism, whydo we believe this to be the case?

Marine P&I Review


Risk of further unbudgeted calls

The following graph plots the average marketsupplementary call accuracy over the last 16 years and compares it to the average market general increasesannounced over the same period.

The intent of the graph is to demonstrate the market cycle.The last hard market phase in the late 1980's peaked in1992 and subsequently softened markedly in the mid tolate 1990's before hardening significantly again in 2002.

The graph clearly shows the progression and extent of the excess calls charged between 1987 and 1991.Increases in advance call levels, as highlighted by thegeneral increase line, however 'lagged' behind theproblems by at least two years.

Why did things go so wrong in the late 1980's?There were a number of factors involved, both internal and external.

Within the market the prevailing philosophy of the Clubs was one of not building or retaining significant reservespreferring to allow the shipowning Members to hold on to,what is in effect their own money. Risk modelling wasalmost unheard of and certainly no one at that point wasworking on reviewing factors outside of the market to tryto predict claims trends.

In terms of 'external factors' in the late 1980's the world was emerging from recession, ships were beingreactivated from lay-up. The world was also becoming amore litigious place to do business. This combination ofsuch factors lead to a huge increase in overall claims levels.This was a relatively sudden increase in underlying claimstrends that caught the market completely by surprise andlargely unprepared.

Broadly speaking therefore the unbudgeted supplementarycalls of the late 1980's were caused by a combination ofinadequate reserving within the Clubs and a sharp upturnin claims in the shipping world.


Marine P&I Review

-10%

0%

10%

20%

30%

40%

50%

60%

Call

accu

racy

Average Percentage Variance in Estimated Total Call Average General Increases

0

5

10

15

20

25

30

35

40

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Gen

eral

incr

ease

What is different today?Like most underwriting cycles, the hard market phase in the early 1990's saw a typical over-correction in terms ofrating. Rating levels were raised massively and probablyout of proportion with the increase in risk. This was due to a straightforward overreaction to the problems in theprevious years, genuine fears about continuing increases in claims levels and a conscious strategy in a number of cases to actually build free reserves.

Premium levels within the market were more than doubled over this period. Following these five years of rapid rate increases, market income peaked in 1994/95.

This increase in the premium base allowed the Clubs to grow the amount of funds held as reserves. At this point the market philosophy had changed to a prevailingview that reserves were a positive thing, necessary toinsulate Members against underwriting results and preventunbudgeted supplementary calls. Over roughly the sameperiod (1991 to 1995) individual Club retention's withinthe International Group pooling arrangement increasedfrom US$1.6 million to US$5 million each loss. This added further potential volatility to claims on individualClubs and consequently provided greater necessity toincrease reserves.

Significantly there is also a difference in the cause of the deficits experienced by the Clubs. There has been norecent rapid rise in claims levels, as seen in the late 1980's.The current deficits are as result of premiums falling due to competition, against the background of relatively stableclaims levels.

Against such a background therefore, our optimism that there will not be a return to the market wide excesssupplementary calls is based on:

– Proportionately higher reserves, which give the Clubsmore time to 'underwrite' out of the current deficits

– The rapidly hardening market, should enable viablepremium levels to be restored before the deficits become 'critical'

This is not to say that all the individual Clubs within themarket will not have (continued) problems – we do expectfurther 'isolated' difficulties, however we do not expect themarket wide effects of a decade ago. The above analysis is also not a foregone conclusion. The renewal in 2002 will not be enough to bring the market as a whole into'balance'; at least a further round of significant increases atthe forthcoming renewal will be necessary to achieve this.

This Section is an updated version of an article written by Willis for Lloyd's List in April 2002.

Marine P&I Review


Risk of further unbudgeted calls (continued)

“The current deficits are as a result of premiums falling due to competition, against the background of relatively stable claims levels.”


Marine P&I Review

At the 2002 renewal, the International Group (IG) opted totake the third year option on a three-year deal, whicheffectively capped any rise to a maximum of 20 percent.This cap only applied to the main part of the programmeand the upper layers were subject to normal marketrenegotiation. The combined effect saw an increase in there-insurance rates varying from 23 percent on 'dirty'tankers to 37 percent on dry cargo and passenger vessels.

The movements in re-insurance rates over the last 13 years are highlighted in the following graph.With the exception of passenger vessels, which were rated as dry cargo vessels until 1996, the re-insurance rates are still well below those that applied during the early nineties.

With the significant hardening of the Insurance markets,the IG will inevitably be quoted a very significant rise at theforthcoming renewal. This is regardless of the programme'scontinuing positive claims record.

Last year we mentioned that one concern with the IG deciding to take the third year option, rather than to undertake a voluntary re-negotiation, was there-insurance market would take a particularly harsh line at the 2003 renewal.

At the time of writing the current arrangements still have four months to run, therefore the renewalnegotiations are at a very early stage and nothing has yet been agreed. Both the Clubs and re-insurers arecurrently engaged in attempting to establish the more favourable negotiating position.

Theoretically, the IG has a number of options, which itcould exercise during the negotiation process. The Clubscould increase their individual Club and/or the Poolretentions. They could also simply take a greater amount of co-insurance on the main re-insurance programme itself. Over the last few months the IG has had areinsurance study group review all these alternatives.

Marine P&I Review


International Group re-insurance

Development of IG reinsurance rates

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

OtherPassenger Clean TankerDirty Tanker

90 91 92 93 94 95 96 97 98 99 00 01 02

US$

per

GT

Reducing risk passed on to the IG reinsurers should help in mitigating increases in the main reinsurance premium,however the Clubs will still have to account for theincreased exposures they retain.

As retentions increase, the potential volatility of the cost of retained claims also increases. With the Clubs' balancesheets already under strain, their ability to successfullymanage the impact of increased claims volatility withoutadditional, separate reinsurances for their individualexposure is questionable. Buying individual reinsurance, formost Clubs, would cost more proportionately than retainingthe risk within the main IG programme.

The effect of re-insurance costs on overall P&I premiumsremains significant. In overall terms, each 5 percent rise in the re-insurance costs, on average, would equate to a 1 percent rise in the overall P&I premiums. The impact willnaturally vary for individual shipowners, depending on fleet profile.


Marine P&I Review

US$4.25bn

Catastrophe call liability of shipowners

Club catastrophe reserve or insurance (if any)

Top layer

Third excess

Second excess

75% First excess

Upper pool

Lower pool

Club retentions

2.03bn

1.53bn

1.03bn

530m

100m

30m

20m

5m

Co-in

sura

nce

10% Be

nfie

ld G

reg

15%

Oil pollution1bn limit

100m

The structure of the IG's re-insurance programmeremained unaltered as follows:

“With the significant hardening of the Insurance markets,the IG will inevitably be quoteda very significant rise at theforthcoming renewal.”

Following two years of significant change in the fixedpremium market, the last twelve months have seencomparatively little activity in this sector. Despite thedownturn in the financial position of the mutual P&I Clubsand increased concern about further unbudgeted calls, thefixed premium sector as a whole has not seen substantialgrowth in their market share. This is arguably a positivesign as stability is a prerequisite to confidence in anyproduct and the fixed premium facilities need todemonstrate some continuity if they are to lose theperception of being a "short term market".

Nearly all the fixed markets have seen limited growth intheir business and are looking to develop relativelyconservatively over the next twelve months. This is despitea background of sizeable general increases being called bythe P&I Clubs at the last renewal and the announcement ofsimilar rises for 2003.

AXA Corporate SolutionsAXA Corporate Solutions is a 100 percent ownedsubsidiary of the AXA Group.

AXA provide P&I cover with varying limits, up to amaximum of US$500 million. They also offer FD&D andCharterers Liability covers. Broadly speaking thepolicywordings offer similar cover to that of International Group Clubs.

Since establishing the P&I facility in November 1999,the insured fleet has grown to a current total of about 600 vessels with a combined gross tonnage in excess of 2 million GT. The insured portfolio is predominantlyEuropean, smaller dry cargo vessels. The average per-vesselsize is approximately 3,300 GT and about 28 percent areocean going. The 2001 year saw a 100% increase inpremium income to US$7 million and AXA expect to see afurther 50% growth this year.

Going forward, they are mainly aiming to target 'bluewater' dry cargo vessels up to approximately 40,000 GT.They will consider other types of vessel, but specificallyavoid tankers over 3,000 GT or those that carry persistentoil as cargo. AXA are also unwilling to quote for passengervessels carrying more than 1,000 passengers, reefer vesselsor US flagged, owned or crewed vessels.

AXA market themselves as endeavouring to focus theirefforts on quality both in terms of their client base and inthe service which they offer. In addition to the usual globalnetwork of independent correspondents, AXA Corporatecan also rely on the support of local AXA Groupsubsidiaries around the world.

Marine P&I Review


P&I fixed premium market

An interesting supplemental cover from AXA is their'medical assistance' programme arranged with the co-operation of AXA Assistance. This is an automaticadditional cover for persons onboard ships insured for P&Iby AXA. The facility provides in-house diagnosis, emergencyembarkation, hospitalisation, transport, medical expensesand repatriation. Costs will be paid directly by AXA therebyavoiding relatively small transfers of funds by an assured.

AXA is rated AA by Standard & Poor's.

British Marine Luxembourg SAFollowing its successful demutualisation, the British Marine(BML) is now an independent fixed premium Insureroffering P&I, FDD and H&M insurance. The maximum limitoffered for P&I business is US$500 million each incident.The US$25 million rights issue referred to in our review lastyear has been completed and it leaves the Club with freereserves (over all classes) in excess of US$50 million. BMLare currently rated as BBB+ by Standard and Poor's with"outlook stable". On the management side, there has beenfurther changes with Ian Agnew, a former senior marineLloyds Underwriter joining as Chairman and Tim Harrisleaving the Steamship Mutual to take up the role ofDirector of P&I Underwriting.

BML has continued its policy of concentrating on itstraditional core book of smaller vessels up to a maximumof about 10,000 gross tons. The tonnage insured for P&Irisks is about 3,500,000 gross tons covering 3,500 vessels.The annual premium income on this business is aboutUS$26,500,000. Europe and the Far East remain the mainsources of business with Dry cargo vessels representing the single largest class of vessel.

BML is rated BBB+ by Standard & Poor's.

Osprey Underwriting Agency LtdOsprey was founded in 1991, making it the longestestablished of the current fixed premium facilities. Osprey isan agency, which underwrites on behalf of Lloyd's insurers.

From the beginning Osprey sought to provide cover only to owners that they recognised as not requiring the limitsoffered by the mutual clubs. Consequently they concentrateon smaller vessels, usually with relatively limited trading.

Unlike the other fixed premium facilities mentioned in thissection, Osprey are also willing to insure US based vessels.In terms of premium income the US market representsapproximately 49 percent of their portfolio.


Marine P&I Review

UK

ROW

Far East

Southern Europe

Northern Europe

4%

13%

20%

19%

44%

British Marine Tonnage split by geographical location British Marine Tonnage split by vessel type

Smoothwater

Tugs

Dry Cargo

Containers

Fishing

Tanker

Other

15%

1%

41%

12%

9%

6%

16%

Osprey currently provide cover for P&I risks up to amaximum limit of US$25 million.

As with the other fixed premium providers Osprey's P&Iwording offers similar 'heads of cover' as the mutual clubs.In addition to standard P&I, Osprey are also able to providecover for:

– Maritime Employers Liability exposures, for those who do not own or operate vessels but whose employeeswork within the maritime industry.

– Third party liability coverage for owners and/or operatorsof shipyards, stevedores, wharfingers and other marinecontracting companies.

– They also have a facility to offer evidence of financialresponsibility to support applications for US Coast GuardCertificates of Financial Responsibility.

All the above policy forms are backed by security with an A rating from Standard & Poor's

QBE Hongkong & Shanghai Insurance LimitedThe "Blue Water" division of QBE is based in Hong Kongand commenced operating at the beginning of the 2002.QBE have previously offered P&I cover to "brown water"

and coastal tonnage in Asia and this new division willaugment these products. Claims will be handled by QBE'sspecialist P&I division in Hong Kong assisted wherenecessary by its international network of correspondents.

QBE are expecting to be insuring about 150 vessels underthis facility by the end of 2003.

The underwriting security will be 50 percent Swiss Re (Asia) and 50 percent QBE. Cover is available up to a top limit ofUS$100 million each incident. This facility is aimed atOwners and Managers of dry cargo vessels in the 5,000 to 30,000 GT range built after 1985. It is QBE's statedintention that all insured vessels will have to be IACSclassed and undergo condition surveys within 30 days of attachment.

Although the focus is on Asian clients, there is norestriction on the trading limits applied to Insured vessels.Currently, QBE are not able to arrange COFR's themselvesbut it is their intention to be able to facilitate these atsome stage in the near future.

QBE are rated A+ and Swiss Re AA+ by Standard & Poor's

Marine P&I Review


P&I fixed premium market (continued)

USA

Africa

Asia

Caribbean

Europe

South America

Middle East

49%

2%

18%

4%

16%

5%

6%

Osprey Tonnage split by geographical location Osprey Tonnage split by vessel type

Tug and Barge

Crew only

Tanker

Passenger

General cargo

Offshore contractors

Other

Marine contractors

Fishing

22%

10%

26%

10%

18%

5%

3%

4%

26%

Southern Seas Management (UK) LimitedBrighton based Southern Seas offer cover up to a limit of US$50 million. Like most of the other fixed premiumfacilities it is aimed at operators of non US vessels,particularly dry cargo, of up to 10,000 Gross Tons.For vessels that trade to the United States, they have an arrangement with Arvak for the provision of COFR's.In addition to the core P&I business which utilises Lloydssecurity, they can provide Freight, Demurrage and Defencecover through the Hanseatic Pool and have developed aConcessionaires cover for cruise ships with a US$15 millionlimit, again with Lloyds security.

Southern Seas currently arrange insurance on about 120 vessels, mainly dry cargo, which emanatepredominantly from East Europe including Greece andTurkey, South America, India and East Africa.

Southern Seas are also currently working on creating aBermudan mutual insurer, which will be designed to offercover to vessels up to about 25,000 Gross Tons. The focuswill again be on dry cargo vessels and will offer a top limitof US$50 million. They hope to launch this mutual, whichwill be named The South of England Protection andIndemnity Association (Bermuda) Limited, early in 2003.

The current P&I cover is placed with Lloyds which is rated A by Standard & Poor's

Terra Nova Insurance Co.Terra Nova have been established for over five years. The P&I team is led by Andrew Barker and Michael Newbury,both of whom are experienced in both the fixed andmutual P&I markets.

Terra Nova currently insure over 2,500 vessels, the majority of which are small craft below 5,000 GT engaged in local, coastal and short sea trade. Generalcargo vessels account for over 50 percent of the tonnagecovered. They do not write any US flag tonnage for non-US vessels calling at US ports however Terra Nova can arrange OPA/COFR coverage.

Limits are offered up to a maximum of US$25 millionalthough a significant number of Owners buy lower limits.

Terra Nova's P&I wording offers similar 'heads of cover' as the mutual clubs. Although Terra Nova do not offerinsurance for Freight, Demurrage and Defence risks, theycan give aid and advise to their assureds and can arrangefixed price legal aid and litigation support.


Marine P&I Review

Far East

Middle East

Indian Sub-Continent

Eastern Europe

Africa

Canada

Western Europe

South America

7%

11%

2%

12%

5%

2%

34%

27%

Terra Nova Tonnage split by geographical location Terra Nova Tonnage split by vessel type

RoRo/Container

Passenger

General cargo

Tug and barge

Fishing

Tanker

Specialist

Bulker

8%

6%

41%

13%

7%

16%

6%

3%

Early in 2000 Terra Nova were acquired by MarkelCorporation, a large American composite insurer with total assets in excess of US$5 billion.

Since Markel's involvement certain loss making units have been placed into run-off, however the Terra Nova P&I division have been publicly supported as a niche area with long term potential.

Although Terra Nova Insurance Company is currently ratedBBB- by Standard and Poor's, the cover is also availableutilising Lloyds security through the Markel Syndicate whoare rated at A- by the major rating agencies.

Other Markets

There are a number of other facilities offering fixedpremium P&I cover. Of these Ingosstrakh (previously theRussian state insurance company for International business)is of note, particularly for Russian and ex-Russian business.

Ingosstrakh Insurance Co.Ingosstrakh have been offering P&I Insurance for 30 years. Their current portfolio consists mainly ofowners/operators from Russia and other East EuropeanCountries. The remaining portfolio, whilst appearing to be of an International nature has in most cases some form of Russian or former Russian connection.

Ingosstrakh cover is similar to that provided by theInternational Group Clubs.

Limits of liability can be provided up to a maximum of US$100 million although the vast majority of Owners havelimits of no more than US$10,000,000.

Marine P&I Review


P&I fixed premium market (continued)

below 1,000

1,001 to 3,000

3,001 to 5,000

5,001 to 10,000

10,001 to 15,000

15,001 to 20,000

over 20,001

20%

38%

28%

7%

3%

2%

2%

Ingosstrakh Tonnage split by geographical location Ingosstrakh Tonnage split by vessel type

General cargo

Bulker

Tugs and barges

Fishing

Reefer

Ro-Ro/Ferries

Tanker

Others

48%

5%

4%

11%

6%

3%

18%

5%

Ingosstrakh cover a wide range of ships, from very small inland operating vessels through to larger (in excess of 20,000 GT) ocean going vessels. They insure approximately 1,200 vessels, with an annualpremium income of about US$13 million.

Ingosstrakh are yet to seek S&P rating. As a consequencethey are unlikely to imminently attract a wide range ofinternational based tonnage. At this time howeverIngosstrakh remain an important insurer to manyshipowners within Eastern Europe and to those withEastern European connections.


Marine P&I Review

Facility Maximum limit (US$) S&P rating No. of vesselsAXA 500 M AA 600BML 500 M BBB+ 3,500Osprey 25 M A N/AQBE 100 M A+/AA N/ASouthern Seas 50 M A 120Terra Nova 25 M BBB-/A- 2,500Ingosstrakh 100 M N/A 1,200

Fixed Market Summary

Section fourAverage Expense Ratios (AER's) were introduced in 1999with the intention of enabling direct cost efficiencycomparisons to be made between all the InternationalGroup Clubs.

Their introduction was in part due to pressure from theEuropean Commission to improve transparency and costcompetition between the Clubs.

All Clubs are required to follow exactly the same formatwhen calculating their AER figure. The ratio is a five yearaverage of:

operating costs X 100(premium income + investment income)

AER's are a reasonable idea in principal, however directcomparisons are difficult in this area. It would be toosimplistic to state that the Club with the lowest AER wasthe most efficient and the highest the most inefficient.

There are a number of factors that affect the AER figure.For example, a Club with a disproportionately high level ofpremium or investment income will produce a lower AER.Conversely loss prevention programmes, which nearly allClubs now consider critical to reducing the overall cost ofinsurance, increase direct operating costs therefore pushingup the AER. Another major factor that affects the AER iswhether the Club owns or rent their office space. If it isowned, the operating costs will be less, therefore reducingthe AER. Owning property however is not automatically abenefit, as it means the costs associated with the purchaseare not available for investment.

The AER figures for the 2000/01 and 2001/02 years alsodemonstrate another difficulty with this measure of costefficiency. The increase in average AER figures for theseyears is largely as a result of poor investment incomeperformance, rather than from less efficient operations.As will be noted from the above formula, a reduction ininvestment income produces an automatic increase in the AER figure.

The Shipowners' Club has a significantly higher AER thanthe other Clubs, but this is also to be expected as theirbusiness consists of large numbers of small ships payingrelatively low premiums per vessel.

The results themselves are of limited use to Shipownersseeking to establish the cost efficiency of their Club,compared to others in the market. A more useful guide willbe to see the trends over a number of years. These trends,along with other factors, can be used to assist owners inunderstanding how well their Club is operating, both initself and in comparison with the rest of the market.Consequently we have included all four years publishedAER's in the following graph.

Marine P&I Review


Average Expense Ratio (AER) Comparisons

1998/99 1999/00 2000/01 2001/02

0

5

10

15

20

Ship

owne

rs

Wes

t of E

ngla

nd

Amer

ican

UK C

lub

Skul

d

Swed

ish

Stea

msh

ip

North

of E

ngla

nd

Lond

on

Brita

nnia

Gar

d

Stan

dard

Japa

n

Average Expense Ratios (AER)

Willis Marine P&I Review 23

The following individual Club pages include consolidated,Financial Year summaries for each Club. As in previousyears, our main aim in presenting these summaries hasbeen consistency. There are still variations between the wayClubs report, however we have tried as far as possible tocompare 'like with like'. We have simplified andsummarised certain aspects, but where information isavailable, we have tried to adopt the same approach for all Clubs.

We define below the figures included under each heading:

Estimates UsedA number of Clubs are unwilling to disclose all the figures used in our analysis, consequently in the followingpages we have been forced to make a number of educatedestimates. These are highlighted as follows (all figures US$, 000's):

Marine P&I Review


Introduction to Club Financial pages

Calls and Premiums All calls less brokerage.Reinsurance Premiums All reinsurance premiums.Expenses All general management, administrative and

audit expenses.Operating Income Calls, less reinsurance costs, less expenses.Gross Paid Claims Paid gross claims, including Pool contributions

(for the sake of consistency we have only considered paid claims).

Net Paid Claims Paid gross claims less reinsurance and Pool recoveries.

Operating Surplus Operating income, less net paid claims.Investment Income All investment income, exchange gains, tax etc.Surplus for Year Operating surplus, plus investment income.Net Assets Total assets (at market value), less creditors, less

miscellaneous provisions for taxation etc., less additional calls advised but not yet debited.

Outstanding Claims Net estimated outstanding claims.Forecast Additional Calls Calls advised but not yet debited.Free Reserves Net assets (market value) + Forecast additional

calls (where available) - Outstanding claims.

Britannia1996/97 Brokerage: 4,340 Claims management expenses: 5,5001997/98 Brokerage: 3,899 Claims management expenses: 5,5001998/99 Brokerage: 4,077 Claims management expenses: 5,5001999/00 Brokerage: 6,092 Claims management expenses: 6,7002000/01 Brokerage: 5,000 Claims management expenses: 5,5002001/02 Brokerage: 6,000 Claims management expenses: 6,500

Standard1996/97 Claims management expenses: 3,1791997/98 Claims management expenses: 3,5941998/99 Claims management expenses: 5,0001999/00 Claims management expenses: 4,6002000/01 Claims management expenses: 5,5002001/02 Claims management expenses: 7,000

UK1997/98 Brokerage: 9,000 Claims management expenses: 18,0001998/99: Brokerage: 9,000 Claims management expenses: 18,0001999/00: Brokerage: 11,000 Claims management expenses: 19,0002000/01: Brokerage: 13,000 Claims management expenses: 18,0002001/02 Brokerage: 13,000 Claims management expenses: 18,000

West of England1998/99 Claims management expenses: 9,0501999/00 Claims management expenses: 8,5402000/01 Claims management expenses: 9,7002001/02 Claims management expenses: 10,000

Club Financial pages Notes

BritanniaWith effect from the 1997/98-policy year Britannia enteredinto a reinsurance contract with a newly formed company,Boudicca Insurance Company Limited, located andregulated in Bermuda. Boudicca Insurance holds assets(currently totaling US$106.7 million) in a way that theycannot be dissipated to the detriment of the reinsurancecontract with Britannia. This is intended to be a tax efficientvehicle for a proportion of Britannia's reserves.

Boudicca is owned and controlled by the Iceni Trust, acharitable trust for which Report and Accounts areunavailable. In our summary page for Britannia for the sakeof effective comparison with previous years, we haveincluded Boudicca's assets in the figures. The assets ofBoudicca as disclosed by the Club are as follows:

1997/98 US$62 million 1998/99 US$87 million 1999/00 US$97.5 million2000/01 US$105.4 million2001/02 US$106.7 million

North of England/Newcastle ClubThe Newcastle Club merged with the North of England in1998/99. To try to demonstrate the trends as clearly aspossible the 1998/99-year figures for the North of Englanddo not include the 'income and expenditure' figures for theNewcastle Club. We have however included the NewcastleClub's free reserve figure for this year to reflect the totalcombined reserve. For the subsequent years we haveincluded the fully integrated figures under the North ofEngland. As all open years for the Newcastle Club havenow been formally closed we have not included a separatepage for this Club.

Swedish ClubThe Swedish Club discloses it's financial results on adifferent basis to the rest of the International Group. Withinthe Swedish Club's published Report and Accounts there isno allocation of funds between their Protection andIndemnity and Hull and Machinery Classes. This makes theP&I class impossible to compare directly with other Clubsand consequently we have not included a full financialsummary for this Club.

Standard and Poor'sThe Standard and Poor's (S&P) ratings mentioned in the following pages fall into two categories, interactiveratings and public information ratings. S&P establishinteractive ratings following in-depth meetings with theClub Managers. Interactively rated Clubs are identified by '*' after the rating. Public information ratings aresignified by a 'pi' subscript and are established purely on the basis of the information provided in the Clubs'published financial statements.

It is the Clubs themselves that choose whether to pursuean interactive rating and there is a cost to the Club fromS&P for the consequent additional work involved. It isworthy to note that when an interactive rating isundertaken, the rating of the particular Club usually showssome form of improvement from the public informationrating. This is interesting as the majority of the interactiveratings have taken place over the last three years, when themarket has generally experienced deteriorating levels ofassets and free reserves.


Marine P&I Review

– Total entered tonnage increased by 30%– Premium increased by US$20.6 million, including the contribution of

unbudgeted supplementary calls– Net paid claims increased by US$13 million– Net Assets reduced by US$21.5 million – Free Reserves (including forecast additional calls) increased by nearly 29%

2000 2001 2002BBBpi BBB+* BBB*

S&P rating

Marine P&I Review


1999/00 2000/01 2001/02Calls and Premiums 28,703 28,968 49,538 Reinsurance Premiums -5,271 -7,818 -8,284 Operating Expenses -5,945 -5,137 -6,778 Operating Income 17,487 16,013 34,476 Gross Paid Claims na na na Net Paid Claims 19,667 20,997 34,130 Operating Surplus (Deficit) -2,180 -4,984 346 Investment Income 5,452 1,774 -2,414 Surplus for Year (Deficit) 3,272 -3,210 -2,068

- Net Assets (market) 75,634 73,204 51,738 Outstanding Claims 59,452 69,337 59,690 Forecast Additional Calls 9,936 9,858 25,628 Free Reserves 26,118 13,725 17,676 (Including Forecast Supplementary Calls)

Consolidated financial year summary (US$,000’s)

2000 2001 2002Owned / Mutual 7,880,000 9,400,000 12,300,000 Chartered / Fixed 920,000 1,100,000 1,450,000 Total 8,800,000 10,500,000 13,750,000

Entered tonnage

AmericanAmerican Underwriting Development

American Underwriting Development

American Assets and Free Reserves

0

10,000

20,000

30,000

40,000

50,000

Net Paid Claims Total tonnage (GT)Calls and Premiums

01/0200/0199/0098/9997/98

US$

(,00

0's)

02m4m6m8m10m12m14m16m

-9,000-6,000-3,000

03,0006,0009,000

12,00015,000

Investment Income

Surplus for Year (Deficit)


01/0200/0199/0098/9997/98

010,00020,00030,00040,00050,00060,00070,00080,000

Free Reserves (Including Forecast Supplementary Calls)Net Assets (market)

01/0200/0199/0098/9997/98

– 5% rise in owned entered tonnage– 22% increase in paid premiums – US$27 million overall deficit largely as a result of negative investment

performance– 6% reduction in Net Assets– 15% reduction in Free Reserves

2000 2001 2002Api Api Api

S&P rating


1999/00 2000/01 2001/02Calls and Premiums 106,334 118,175 144,568 Reinsurance Premiums -18,124 -22,336 -24,384 Operating Expenses -13,377 -11,176 -12,318 Operating Income 74,833 84,663 107,866 Gross Paid Claims 138,275 122,531 136,471 Net Paid Claims 107,584 113,909 111,005 Operating Surplus (Deficit) -32,751 -29,246 -3,139 Investment Income 23,842 -5,750 -24,225 Surplus for Year (Deficit) -8,909 -34,996 -27,364

Net Assets (including Boudicca assets) 621,885 573,890 541,191 (Net) Outstanding Claims 415,891 422,435 418,054 Additional Calls not yet debited - 10,202 13,541 Free Reserves 205,994 161,657 136,678(Including Supplementary Calls not yet debited, and including Boudicca)


2000 2001 2002Owned / Mutual 62,100,000 63,800,000 66,700,000 Chartered / Fixed 16,800,000 18,000,000 19,300,000 Total 78,900,000 81,800,000 86,000,000

Entered tonnage

Britannia

Marine P&I Review

Britannia Underwriting Development

Britannia Underwriting Development

Britannia Assets and Free Reserves

US$

(,00

0's)

0

50,000

100,000

150,000

200,000

Gross Paid Claims Total tonnage (GT)Calls and Premiums

01/0200/0199/0098/9997/9896/9795/9694/950

20m

40m

60m

80m

100m

-50,000-40,000-30,000-20,000-10,000

010,00020,00030,00040,00050,000

Investment Income



01/0200/0199/0098/9997/9896/9795/9694/95

0100,000200,000300,000400,000500,000600,000700,000800,000

Free Reserves (Including Supplementary Calls not yet debited, and including Boudicca)Net Assets (including Boudicca assets)

01/0200/0199/0098/9997/9896/9795/9694/95

– Total entered tonnage up by 4%– Paid premiums up by 10%– Gross paid claims down by 18%– Operating deficit improved by US$51 million– Assets and Free Reserves down marginally

(–3.5% and –2.4% respectively)

2000 2001 2002Api Api Api

S&P rating

Marine P&I Review


1999/00 2000/01 2001/02Calls and Premiums 123,139 122,121 134,263 Reinsurance Premiums -29,144 -28,001 -31,328 Operating Expenses -20,744 -15,436 -18,131 Operating Income 73,251 78,684 84,804 Gross Paid Claims 151,371 168,880 138,720 Net Paid Claims 108,057 146,738 101,503 Operating Surplus (Deficit) -34,806 -68,054 -16,699 Investment Income 39,950 1,100 -12,518 Surplus for Year (Deficit) 5,144 -66,954 -29,217

- Net Assets (market) 680,155 623,178 601,519 (Net) Outstanding Claims 445,900 445,989 430,797 Forecast Additional Calls 13,917 22,750 24,500 Free Reserves 248,172 199,939 195,222(Including Forecast Supplementary Calls)



Entered tonnage

GardGard Underwriting Development

Gard Underwriting Development

Gard Assets and Free Reserves

0

50,000

100,000

150,000

200,000

250,000


01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

0

20m

40m

60m

80m

100m

120m

-80,000-60,000-40,000-20,000

020,00040,00060,00080,000

Investment Income



01/0200/0199/0098/9997/9896/9795/9694/95

0100,000200,000300,000400,000500,000600,000700,000800,000

Free Reserves (Including Forecast Supplementary Calls)

Net Assets (market)

01/0200/0199/0098/9997/9896/9795/9694/95


Japan

Marine P&I Review

0

50,000

100,000

150,000

200,000

250,000


01/0200/0199/0098/9997/9896/9795/9694/95

– 5.6% rise in total entered tonnage– 2.8% rise in premiums– Net paid claims relatively stable– 4.5% reduction in Net Assets– 5.4% reduction in Free Reserves

1999/00 2000/01 2001/02Calls and Premiums 103,048 94,417 97,027 Reinsurance Premiums -18,877 -15,359 -14,690 Operating Expenses -13,567 -13,384 -11,128 Operating Income 70,604 65,674 71,209Gross Paid Claims 90,961 75,679 64,117 Net Paid Claims 83,023 61,847 61,013 Operating Surplus (Deficit) -2,175 -9,115 -2,962Investment Income 2,515 12,429 8,907 Surplus for Year (Deficit) 340 3,314 5,945

Net Assets (Market) 190,019 212,721 203,206Outstanding Claims (P&I Only) 129,044 136,148 130,760 Forecast Additional Calls - - - Free Reserves 60,975 76,573 72,446

Consolidated financial year summary (US$,000’s)Japan Underwriting Development

Japan Underwriting Development

Japan Assets and Free Reserves

0

30,000

60,000

90,000

120,000

150,000


01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

0

10m

20m

30m

40m

50m

60m

-12,000-9,000-6,000-3,000

03,0006,0009,000

12,00015,000

Investment IncomeSurplus for Year (Deficit)


01/0200/0199/0098/9997/9896/9795/9694/95


Entered tonnage

2000 2001 2002BBpi BBpi BBpi

S&P rating

– Club in run-off– Open years progressing well as at the publication of the

most recent Report and Accounts– Estimated free reserve just over US$14 million

2000 2001 2002n/a n/a n/a

S&P rating

Marine P&I Review


1999/00 2000/01 2001/02Calls and Premiums 45,937 21,311 4,529 Reinsurance Premiums -6,229 -2,427 775 Operating Expenses -8,874 -3,745 -2,952 Operating Income 30,834 15,139 2,352 Gross Paid Claims 48,833 43,380 37,183 Net Paid Claims 33,649 33,275 16,773 Operating Surplus (Deficit) -2,815 -18,136 -14,421 Investment Income 806 4,137 1,106 Surplus for Year (Deficit) -2,009 -13,999 -13,315

Net Assets 132,705 111,325 95,315 Outstanding Claims 150,521 107,482 81,045 Forecast Additional Calls 15,164 - - Free Reserves -2,652 3,843 14,270(Including Forecast Supplementary Calls)


Liverpool & LondonLiverpool & London Underwriting Development

Liverpool & London Underwriting Development

Liverpool & London Assets and Free Reserves

010,00020,00030,00040,00050,00060,00070,00080,000

Gross Paid ClaimsCalls and Premiums

01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

-20,000-15,000-10,000-5,000

05,000

10,00015,00020,00025,000

Investment IncomeSurplus for Year (Deficit)


01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

-30,000

0

30,000

60,000

90,000

120,000

150,000

Free Reserves (Including Forecast Supplementary Calls)Net Assets

01/0200/0199/0098/9997/9896/9795/9694/95

2000 2001 2002n/a n/a n/a n/a n/a n/a n/a n/a n/a

Entered tonnage


London

Marine P&I Review

2000 2001 2002APi APi BBBpi

S&P rating

– 5% reduction in owned entered tonnage– Nominal increases in Premiums and Gross Paid Claims– Negative result on investment income exceeding US$17 million– 14% reduction in Net Assets– 32% reduction in Free Reserves

1999/00 2000/01 2001/02Calls and Premiums 65,803 62,950 64,510 Reinsurance Premiums -8,149 -9,207 -10,165 Operating Expenses -16,858 -16,745 -15,099 Operating Income 40,796 36,998 39,246 Gross Paid Claims 72,316 80,948 83,580 Net Paid Claims 67,657 77,914 74,936 Operating Surplus (Deficit) -26,861 -40,916 -35,690 Investment Income 28,970 -5,855 -17,531 Surplus for Year (Deficit) 2,109 -46,771 -53,221

Net Assets 426,629 380,707 326,709 Net Outstanding Claims 300,066 279,155 264,363 Forecast Additional Calls 18,405 17,555 18,331 Free Reserves 144,968 119,107 80,677(Including Forecast Supplementary Calls)


2000 2001 2002Owned / Mutual 26,026,186 28,974,179 27,444,166 Chartered / Fixed 1,184,862 991,018 862,936 Total 27,211,048 29,965,197 28,307,102

Entered tonnage

London Underwriting Development

London Assets and Free Reserves

0

20,000

40,000

60,000

80,000

100,000

120,000


01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

0

5m

10m

15m

20m

25m

30m

35m

-60,000-50,000-40,000-30,000-20,000-10,000

010,00020,00030,00040,00050,000

Investment Income



01/0200/0199/0098/9997/9896/9795/9694/95

0

100,000

200,000

300,000

400,000

500,000


01/0200/0199/0098/9997/9896/9795/9694/95

London Underwriting Development

– 14% rise in total entered tonnage– 6% increase in paid premiums – US$5.7 million overall surplus despite adverse investment performance– 2% increase in Net Assets– 3% increase in Free Reserves

2000 2001 2002BBBpi A-* A-*

S&P rating

Marine P&I Review


1999/00 2000/01 2001/02Calls and Premiums 83,325 94,495 100,314 Reinsurance Premiums -16,776 -16,827 -19,373 Operating Expenses -12,519 -14,335 -13,037 Operating Income 54,030 63,333 67,904 Gross Paid Claims 82,191 92,652 79,914 Net Paid Claims 74,905 70,220 60,440 Operating Surplus (Deficit) -20,875 -6,887 7,464 Investment Income -1,135 11,047 -1,728 Surplus for Year (Deficit) -22,010 4,160 5,736

Net Assets (market) 318,339 325,624 332,052 Outstanding Claims 247,651 255,994 259,062 Forecast Additional Calls 18,637 14,797 14,003 Free Reserves 89,325 84,427 86,993(Including Forecast Supplementary Calls)



Entered tonnage

North of EnglandNorth of England Underwriting Development

North of England Underwriting Development

North of England Assets and Free Reserves

0

20,000

40,000

60,000

80,000

100,000

120,000


01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

0

10m

20m

30m

40m

50m

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

Investment Income



01/0200/0199/0098/9997/9896/9795/9694/95

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000


Net Assets (market)

01/0200/0199/0098/9997/9896/9795/9694/95


Shipowners Club

Marine P&I Review

2000 2001 2002Api Api Api

S&P rating

– 12% rise in paid premiums– 12% reduction is net paid claims– Positive underwriting result offset by US$9.8 million investment deficit– 3% reduction in Net Assets– 9% reduction in Free Reserves

1999/00 2000/01 2001/02Calls and Premiums 53,425 53,363 59,779 Reinsurance Premiums -11,670 -13,286 -14,366 Operating Expenses -8,966 -8,687 -9,068 Operating Income 32,789 31,390 36,345 Gross Paid Claims 37,480 48,159 35,814 Net Paid Claims 29,325 35,295 31,133 Operating Surplus (Deficit) 3,464 -3,905 5,212 Investment Income 7,955 -11,288 -9,755 Surplus for Year (Deficit) 11,419 -15,193 -4,543

Net Assets (Market) 151,707 136,514 131,971 Outstanding Claims 81,061 72,612 73,888 Forecast Additional Calls - - - Free Reserves 70,646 63,902 58,083



Entered tonnage

Shipowners Club Underwriting Development

Shipowners Club Underwriting Development

Shipowners Club Assets and Free Reserves

0

10,000

20,000

30,000

40,000

50,000

60,000


01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

0

2m

4m

6m

8m

10m

12m

-20,000-15,000-10,000

-5,0000

5,00010,00015,00020,000

Investment Income



01/0200/0199/0098/9997/9896/9795/9694/95

0

50,000

100,000

150,000

200,000


01/0200/0199/0098/9997/9896/9795/9694/95

– Total entered tonnage reduced by 4%– 2001/02 financial year premium includes US$39.7 million

of unbudgeted supplementary calls– Gross claims marginally increased, net paid claims reduced by 7.5%– Assets increased by 6.4%– Free Reserves reduced by nearly 4%

2000 2001 2002BBBpi BBpi BBpi

S&P rating

Marine P&I Review


Skuld

0

50,000

100,000

150,000

200,000


01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

0

10m

20m

30m

40m

50m

60m

70m

-100,000

-80,000

-60,000

-40,000

-20,000

0

20,000

40,000

Investment Income



01/0200/0199/0098/9997/9896/9795/9694/95

050,000

100,000150,000200,000250,000300,000350,000400,000


Net Assets (market)

01/0200/0199/0098/9997/9896/9795/9694/95

Skuld Underwriting Development

Skuld Underwriting Development

Skuld Assets and Free Reserves

1999/00 2000/01 2001/02Calls and Premiums 142,322 106,041 135,061 Reinsurance Premiums -24,745 -22,516 -20,475 Operating Expenses -26,111 -24,884 -22,887 Operating Income 91,466 58,641 91,699 Gross Paid Claims 113,265 152,403 155,783 Net Paid Claims 111,244 140,335 129,866 Operating Surplus (Deficit) -19,778 -81,694 -38,167 Investment Income 18,504 13,581 18,922 Surplus for Year (Deficit) -1,274 -68,113 -19,245

- Net Assets (market) 363,478 341,424 363,244 Net Outstanding Claims 300,143 274,015 285,371 Forecast Additional Calls 34,187 13,374 - Free Reserves 97,522 80,783 77,873(Including Forecast Supplementary Calls)



Entered tonnage

– 16% rise in paid premiums– 21% reduction is gross paid claims– US$7 million loss on investment income– 8% reduction in Net Assets– 22% reduction in Free Reserves

2000 2001 2002AA-* AA-* AA-*

S&P rating


1999/00 2000/01 2001/02Calls and Premiums 81,882 89,918 104,587 Reinsurance Premiums -15,716 -14,113 - 20,603Operating Expenses -13,861 -14,620 -15,977 Operating Income 52,305 61,185 68,007 Gross Paid Claims 94,518 102,953 124,529 Net Paid Claims 77,503 85,765 95,048Operating Surplus (Deficit) - 25,198 - 24,580 - 27,041 Investment Income 24,429 5,975 - 7,165Surplus for Year (Deficit) - 769 - 18,605 - 34,206

Net Assets 457,884 439,279 405,073Outstanding Claims 276,204 276,104 277,826 Forecast Additional Calls - - - Free Reserves 181,680 163,175 127,247(Including Forecast Supplementary Calls)


2000 2001 200236,500,000 43,000,000 43,000,0005,500,000 8,000,000 10,000,000

42,000,000 51,000,000 53,000,000

Entered tonnage

Standard Bermuda

Marine P&I Review

Standard Bermuda Underwriting Development

Standard Bermuda Underwriting Development

Standard Bermuda Assets and Free Reserves

0

30,000

60,000

90,000

120,000

150,000


01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

Tonn

age

(GT)

0

10m

20m

30m

40m

50m

60m

-40,000-30,000-20,000-10,000

010,00020,00030,00040,000

Investment Income



01/0200/0199/0098/9997/9896/9795/9694/95

0

100,000

200,000

300,000

400,000

500,000

Free Reserves (Excluding Forecast Supplementary Calls)Net Assets (market)

01/0200/0199/0098/9997/9896/9795/9694/95

Marine P&I Review


1999/00 2000/01 2001/02Calls and Premiums 206,424 188,095 302,730 Reinsurance Premiums -46,905 -58,167 -42,844 Operating Expenses -11,757 -9,871 -9,662 Operating Income 147,762 120,057 250,224 Gross Paid Claims 269,748 285,116 288,886 Net Paid Claims 187,603 199,554 205,579 Operating Surplus (Deficit) -39,841 -79,497 44,645 Investment Income 61,283 -18,050 -14,881 Surplus for Year (Deficit) 21,442 -97,547 29,764

Net Assets (Market) 592,176 494,632 410,186 Outstanding Claims 541,982 471,689 436,498 Forecast Additional Calls 63,553 60,511 175,176 Free Reserves 113,747 83,454 148,864(Including Forecast Supplementary Calls)



Entered tonnage

Steamship

2000 2001 2002BBBpi BBBpi BBpi

S&P rating

– Entered tonnage stable– Premium increase almost entirely due to US$114 million of

unbudgeted supplementary calls– Continuing adverse investment result– 17% reduction in Net Assets– Free Reserves increased by US$65 million

(including future supplementary calls)

-100,000-80,000-60,000-40,000-20,000

020,00040,00060,00080,000

Investment Income



01/0200/0199/0098/9997/9896/9795/9694/95

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Gross Paid Claims Total Entered TonnageCalls and Premiums

01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

0

10m

20m

30m

40m

50m

60m

70m

0

100,000

200,000

300,000

400,000

500,000

600,000


Net Assets (Market)

01/0200/0199/0098/9997/9896/9795/9694/95

Steamship Underwriting Development

Steamship Underwriting Development

Steamship Assets and Free Reserves


2000 2001 2002Owned / Mutual 13,800,000 14,900,000 14,700,000 Chartered / Fixed 527,971 700,000 1,100,000 Total 14,327,971 15,600,000 15,800,000

Entered tonnage

Swedish

Marine P&I Review

2000 2001 2002BBBpi BBBpi BBBpi

S&P rating

The Swedish Club writes P&I, FD&D and Hull andMachinery Classes of business. The Club does not howeverpublish separate financial statements for the P&I andFD&D Classes; therefore it is not possible to produce anymeaningful financial comparisons with other P&I Clubs.

Across all classes, the Club had a gross premium income of about US$61 million in 2001/02. This was up fromUS$54 million the previous year. Free reserves howeverdropped by roughly 26 percent over the same period, fromUS$86 million to US$63 million

The H&M Class of the Swedish Club increased its entered Gross Tonnage by roughly 28 percent between2001 and 2002 (from 21 million GT in 2001 to 27 millionGT in 2002). Over a similar period, despite a marginalreduction in the number of ships insured for P&I, thetonnage of the P&I Class remained fairly stable at justbelow 15 million gross tons.

The Club has developed a much more internationalMembership over the last decade. Swedish tonnage nowrepresents only 14 percent of their portfolio, comparedwith around 50 percent ten years ago.

Marine P&I Review


UK Club


Entered tonnage

2000 2001 2002Api AA-* A+*

S&P rating

– 3% rise in total entered tonnage– 15% reduction in paid premiums, 12% rise in net paid claims– Negative investment income contributing to US$128 million overall deficit– 12% reduction in Net Assets– 40% reduction in Free Reserves

1999/00 2000/01 2001/02Calls and Premiums 225,837 252,146 214,035 Reinsurance Premiums -37,068 -36,484 -39,974 Operating Expenses -40,112 -35,007 -32,336 Operating Income 148,657 180,655 141,725 Gross Paid Claims 289,475 237,445 255,433 Net Paid Claims 237,477 218,156 243,449 Operating Surplus (Deficit) -88,820 -37,501 -101,724 Investment Income 77,560 -6,469 -26,239 Surplus for Year (Deficit) -11,260 -43,970 -127,963

Net Assets 1,127,123 1,083,153 955,190 Outstanding Claims 798,834 734,242 744,468 Forecast Additional Calls 55,000 - - Free Reserves 383,289 348,911 210,722(Including Forecast Supplementary Calls)


-150,000-120,000-90,000-60,000-30,000

030,00060,00090,000

120,000

Investment Income

Surplus for Year (Deficit)Operating Surplus (Deficit)

01/0200/0199/0098/9997/9896/9795/9694/95

050,000

100,000150,000200,000250,000300,000350,000400,000


01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

0

20m

40m

60m

80m

100m

120m

140m

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000


01/0200/0199/0098/9997/9896/9795/9694/95

UK Club Underwriting Development

UK Club Underwriting Development

UK Club Assets and Free Reserves


West of England

2000 2001 2002BBBpi BBBpi BBBpi

S&P rating


Entered tonnage

1999/00 2000/01 2001/02Calls and Premiums 131,053 123,172 126,956 Reinsurance Premiums -16,450 -16,062 -17,716 Operating Expenses -19,539 -22,336 -21,792 Operating Income 95,064 84,774 87,448 Gross Paid Claims 160,678 182,473 156,559 Net Paid Claims 130,014 129,656 126,827 Operating Surplus (Deficit) -34,950 -44,882 -39,379 Investment Income 6,544 16,833 10,421 Surplus for Year (Deficit) -28,406 -28,049 -28,958

Net Assets (Market) 536,836 511,109 482,418 Outstanding Claims 409,147 386,261 374,736 Forecast Additional Calls 32,888 30,385 30,100 Free Reserves 160,577 155,233 137,782(Including Forecast Supplementary Calls)


– 10% rise in owned entered tonnage– Premiums and net paid claims relatively stable– 12% improvement in the operating result– US$29 million overall deficit leading to 6% reduction in Net Assets– 11% reduction in Free Reserves

West of England Underwriting Development

West of England Underwriting Development

West of England Assets and Free Reserves

0

50,000

100,000

150,000

200,000


01/0200/0199/0098/9997/9896/9795/9694/95

US$

(,00

0's)

0

10m

20m

30m

40m

50m

60m

-60,000

-40,000

-20,000

0

20,000

40,000

60,000

80,000

Investment Income


Operating Surplus (Deficit)01/0200/0199/0098/9997/9896/9795/9694/95

0

100,000

200,000

300,000

400,000

500,000

600,000


Net Assets (Market)

01/0200/0199/0098/9997/9896/9795/9694/95

The following pages provide comparative information on the supplementary call history of the market.The analysis is broken down as follows:

Table with Basic Data The main reference table. It shows in actual figures theoriginal and final/current estimates for the supplementarycalls of all the Clubs from 1989/90 to 2002/03.

Graphical Depiction of Individual Clubs' ResultsThe raw data from the main reference table is displayedgraphically. The graphs show the original estimatedsupplementary call and the actual call for each Club overthe period 1991 to 2002. The intention of showing thegraphs together is to allow easy comparison of individualClub supplementary call trends.

Direct Graphical Comparisons of Individual Club Results (Percentage Variation from original Estimated Total Call)Pages 46 to 49 provide a more direct comparison of all theClubs' supplementary call results. Each graph shows thepercentage variation from original estimated total call foreach Club over the period 1991 to 2002. The graphs are onthe same scale and provide direct comparison of theindividual Clubs' supplementary call performance andtrends over the period.

NB: Percentage Variation from original Estimated Total CallThis is a direct comparative measure of the Clubs'supplementary call performance. It is necessary for easy,direct comparison as individual Clubs use a wide rangeoriginal estimated supplementary calls.

Marine P&I Review


Supplementary Call History

Policy Year 1989 / 1990 1990 / 1991 1991 /1992 1992 / 1993 1993 / 1994 1994 / 1995 1995 / 1996Supplementary Call Estimate: Original Final Original Final Original Final Original Final Original Final Original Final Original CurrentAmerican Club 80 80 80 120 80 130 80 80 80 90 65 65 50 68Britannia 25 20 25 25 30 0 40 -10 40 -5 40 -5 25 -10British Marine Mutual 20 50 20 45 20 30 0 0 0 0 0 0 0 0Gard 20 20 20 105 30 60 30 15 40 30 40 35 30 15Japan Club 20 25 25 25 30 15 40 0 40 0 20 0 20 20Liverpool & London 10 160 10 160 25 140 25 96.5 40 90 40 170 25 112.95London Steamship 20 130 30 115 30 85 30 30 40 40 40 30 40 30Newcastle 20 95 20 95 30 60 30 45 30 45 40 96 40 130North of England 25 100 25 75 35 70 40 40 40 40 40 40 40 40Ocean Marine 20 20 20 20 20 20 20 20 20 80 30 95 30 95Shipowners 25 15 25 25 25 20 25 0 25 0 25 0 25 0Skuld 20 110 20 130 20 40 20 20 20 20 20 20 20 20Standard (Bermuda) 25 150 25 150 25 65 40 40 40 40 25 25 25 10Standard (London) 0 0 0 0 0 0 0 0 0 0 0 0 0 0Steamship 20 20 20 125 20 67.5 40 40 40 40 40 40 40 40Swedish 25 165 25 240 25 100 10 10 10 10 10 10 10 10UK 20 100 40 150 40 70 40 25 40 30 40 40 40 30West of England 25 155 35 160 50 145 50 50 50 50 50 50 50 50

Where Clubs charge on an Estimated Mutual Basis. 'Supplementary Call' figure provided refers to the percentagecharged after expiry of the policy period (relative to the premium charged during the policy year).

Table with Basic Data

A zero percentage variance from estimated total calls signifies that the Club has charged exactly what it estimated for that year.

A negative percentage variance shows that the Club charged less than it originally estimated for the year in question.

A positive variance highlights that the Club actuallycharged more than was originally estimated for the year.

Comparison of the Average Variances over Five and Ten YearsThe two graphs on page 50 summarise the averagesupplementary call performance of all the Clubs together.They provide a snapshot of the average call variance of allof the Clubs, over the last decade. The first graph showsthe average percentage variance from estimated total callfor all the Clubs over the period 1991 to 2001. The secondgraph makes the same comparison but takes the averageover only the five most recent years.

The best performing Clubs are shown to the left of the graphs, with those over-budget towards the right of the graphs.


Marine P&I Review

1996 / 1997 1997 / 1998 1998 / 1999 1999 / 2000 2000 / 2001 2001/2002 2002/2003Original Current Original Current Original Current Original Current Original Current Original Current Original Current Supplementary Call Estimate

25 34 25 25 25 25 25 45 25 75 25 25 40 40 American Club25 -7.5 25 0 25 10 25 15 25 25 25 25 40 40 Britannia0 0 0 0 0 0 0 0 fixed fixed fixed fixed fixed fixed British Marine Mutual

30 0 30 0 30 0 25 15 25 25 25 25 25 25 Gard20 10 20 10 20 0 20 15 20 10 20 20 20 20 Japan Club25 116 25 172 25 25 25 25 n/a n/a n/a n/a n/a n/a Liverpool & London40 40 40 30 40 20 40 40 40 40 40 40 40 40 London Steamship40 164 40 140 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Newcastle40 40 40 40 40 40 40 40 25 25 25 25 25 25 North of England40 180 40 180 40 110 n/a n/a n/a n/a n/a n/a n/a n/a Ocean Marine25 0 25 0 25 0 25 0 25 0 25 25 25 25 Shipowners20 20 20 20 20 30 20 45 20 65 20 20 20 20 Skuld25 0 25 0 25 0 25 15 25 25 25 25 39 39 Standard (Bermuda)0 0 0 0 0 0 0 0 0 0 0 0 0 0 Standard (London)

40 40 40 40 40 40 40 60 43 86 43 100 43 43 Steamship10 10 10 10 10 0 10 10 10 10 10 10 10 10 Swedish40 25 40 25 40 30 40 30 33 33 33 33 33 33 UK50 50 50 50 50 50 50 50 50 50 20 20 20 20 West of England

Marine P&I Review


Comparison of original and actualsupplementary calls

Britannia

Japan

-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%

Actual Supplementary CallOriginal Supplementary Call Estimate

91 92 93 94 95 96 97 98 99 00 01 02

91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%


American

Gard

91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%


0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 02


Marine P&I Review

London

North of England

91 92 93 94 95 96 97 98 99 0090890

25%

50%

75%

100%

125%

150%

175%

200%


91 92 93 94 95 96 97 98 99 0090890

20%

40%

60%

80%

100%

120%

140%

160%

180%


91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%


Liverpool & London

Newcastle

Marine P&I Review


Comparison of original and actualsupplementary calls

Shipowners Club

Standard Bermuda

91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%


Ocean Marine

Skuld

0

25%

50%

75%

100%

125%

150%

175%

200%


91 92 93 94 95 96 97 98 99 009089

91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%



Marine P&I Review

UK Club

91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 020

20%

40%

60%

80%

100%

120%

140%


Steamship

West of England Swedish

Marine P&I Review


Percentage variation from initial estimated total call

Britannia

Japan

91 92 93 94 95 96 97 98 99 00 01 02-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%

Percentage Variation from Estimated Total Call

91 92 93 94 95 96 97 98 99 00 01 02-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


American

Gard

-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 02

91 92 93 94 95 96 97 98 99 00 01 02-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%



Marine P&I Review

London

North of England

91 92 93 94 95 96 97 98 99 009089-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 009089-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 02-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 02-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%


Liverpool & London

Newcastle

Marine P&I Review


Percentage variation from initial estimated total call

Shipowners

Standard Bermuda

-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 02

-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 02

Ocean Marine

Skuld

91 92 93 94 95 96 97 98 99 009089-25%

0

25%

50%

75%

100%

125%

150%

175%


-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 02


Marine P&I Review

Swedish

West of England

-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 02

-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 02

91 92 93 94 95 96 97 98 99 00 01 02-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


-40%

-20%

0

20%

40%

60%

80%

100%

120%

140%


91 92 93 94 95 96 97 98 99 00 01 02

Steamship

UK Club

Average Percentage Variation from Estimated Total Call Years 1991 to 2001Average Percentage Variation from Estimated Total Call Years 1996 to 2001

-30%

-20%

-10%

0

10%

20%

30%

40%

50%

60%

70%

Live

rpoo

l and

Lon

don

Oce

an M

arin

e

New

cast

le

Stea

msh

ip

Amer

ican

Club

Skul

d

Wes

t of E

ngla

nd

Swed

ish C

lub

Nor

th o

f Eng

land

Lond

on

Stan

dard

(Lon

don)

Unite

d Ki

ngdo

m

Stan

dard

(Ber

mud

a)

Gar

d

Japa

n

Ship

owne

rs

Brita

nnia

-40%

-20%

0

20%

40%

60%

80%

100%

Oce

an M

arin

e

New

cast

le

Live

rpoo

l and

Lon

don

Stea

msh

ip

Skul

d

Amer

ican

Club

Wes

t of E

ngla

nd

Stan

dard

(Lon

don)

Nor

th o

f Eng

land

Swed

ish C

lub

Lond

on

Unite

d Ki

ngdo

m

Japa

n

Brita

nnia

Stan

dard

(Ber

mud

a)

Gar

d

Ship

owne

rs

The divergence in the supplementary call performance of the Clubs is significant.

Over the last ten years, roughly half of Clubs have onaverage charged over-budget calls. This is primarily as a result of the market wide problems, for four or five years until the early 1990's. Consequently the ten-year averagegraph shows ten Clubs above budget and only 7 Clubsperforming on or below budget

Over the most recent five years a polarisation in the market is much more evident.

The five-year average graph outlines this comparativeperformance very clearly. Over the more recent period only six Clubs have on average exceeded their original

estimates. Of these six, three (Liverpool and London,Newcastle and Ocean Marine) have subsequently ceasedactive underwriting. The other three Clubs over budget on average over the last five years are the American Club,Skuld and Steamship Mutual.

At the same time the majority of the market has performedwithin their original estimates, eight Clubs actually belowtheir original estimates.

As outlined earlier in this report we do not expect that the recent over-budget performance of a minority of Clubswill spread to the majority of the market as it did in thelate 1980's. We do expect further problems, but these arelikely to be more specific instances rather than market wide difficulties.

Marine P&I Review


Supplementary call history summary

bgfnz


Intro header

Marine P&I Review


Tonnage split by nationality of management

London

Shipowners

Middle East

Americas

Far East

Northern Europe

Southern Europe

4%

4%

34%

9%

49%

Far East and Australasia

Europe

North America

Latin America

Middle East and Africa

Other

39%

28%

13%

9%

9%

2%

Gard

North of England

Americas

Norway

Asia

Europe

18%

32%

20%

30%

Britannia

Europe

Australiasia

Middle East

Scandinavia

Americas

Asia

11%

2%

4%

12%

12%

59%

American

Middle East

Europe

South America

North America

Asia Pacific

Other

6%

36%

5%

35%

12%

6%

Southern Europe

Far East

Scandinavia

Middle East

Northern Europe

Other

29%

11%

12%

15%

27%

6%


Marine P&I Review

Swedish

West of England

Sweden

Asia

Europe

14%

28%

58%

Europe, including Russia


North America

Far East

51%

11%

11%

27%

Steamship

UK Club

Europe

Indian Sub-Continent


Latin America

North America

Far East

35%

7%

8%

6%

16%

28%

Standard Bermuda

Asia

USA

Northern Europe

Canada

Greece

Italy

12%

16%

26%

14%

13%

19%

Skuld

Scandinavia

Far East

Europe (excl. Scandinavia)

Other

57%

12%

25%

6%

Asia Pacific

Mediterranean

Northern/Eastern Europe

Middle East

Scandinavia

Americas

26%

29%

24%

5%

5%

11%

Marine P&I Review


Tonnage split by vessel type

London

Shipowners

Tankers

General cargo

Container/RoRo

Bulk carrier

35%

4%

14%

47%

Tankers

Offshore

Fishing

Barges

Harbour

Passenger

6%

7%

33%

15%

24%

15%

Gard

North of England

Tankers

General cargo

Container

Bulk carrier

Cruise and ferries

Mobile offshore units

Other

41%

13%

11%

20%

2%

8%

5%

Britannia

Container

General cargo

Bulk carrier

Tankers

Other

20%

4%

32%

42%

2%

American

Small craft

Bulk carrier

Tankers

General cargo etc

16%

42%

23%

19%

Bulk carrier

Container

General cargo

Tankers

Other

49%

13%

8%

23%

7%


Marine P&I Review

Swedish

West of England

General cargo

Container

Tankers

Bulk carrier

Passenger

Ro-Ro

Other

9%

28%

20%

19%

10%

9%

5%

Dry cargo/container

Bulk carrier

Tankers

Cruise and ferries

Other

30%

30%

30%

5%

5%

Steamship

UK Club

General cargo

Container

Tankers

Bulk carrier

Cruise and ferries

Others

13%

17%

27%

33%

8%

2%

Standard Bermuda

General cargo/container

Ferries/passengers

Offshore

Bulkers

Tankers

Other

33%

4%

8%

26%

28%

1%

Skuld

General cargo

Container

Tankers

Bulk carrier

Cruise and ferries

Others

8%

12%

51%

23%

4%

2%

Tankers

Other dry cargo

Container

Bulk carrier

Passenger

Other

45%

10%

8%

28%

7%

2%

Marine P&I Review


General increases

% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003American 8.5 12 32 12.5 8.5 18 7.5 10 0 5 5 10 26 25Britannia 12.5 20 25 10 5 0 5 0 0 0 0 10 28.8 15British Marine Luxembourg 20 25 60 20 15 5 5 N/A N/A N/A N/A N/A N/A N/AGard 10 30 30 10 0 0 5 7.5 0 -3.85 5 10 25 15Japan 0 0 0 0 0 0 tbaLiverpool & London 0 40 50 15 10 5 5 5 N/A N/A N/A N/A N/A N/ALondon 46 25 50 10 7.5 5 5 5 0 5 5 10 27.5 25Newcastle 25 30 30 15 10 5 5 7.5 N/A N/A N/A N/A N/A N/ANorth of England 25 35 40 15 7.5 5 7.5 7.5 5 5 5 10 25 25Ocean 15 25 25 15 7.5 5 0 5 5 N/A N/A N/A N/A N/AShipowners 5 15 20 15 5 0 0 0 0 0 0 0 20 15Skuld 20-35 60-100 30-75 15 10 2.5 5 5 0 5 0 10 30 25Standard (Bermuda) 25 60 25 20 7.5 4.5 7.5 0 0 0 0 7.5 25 25Steamship 10 20 22.5 15 4.5 5 7.5 5 0 0 5 10 25 25Swedish 0 0 0+R/I 15 0+R/I 0+R/I 0 0 0 0 0 7.5 25 25United Kingdom 30 50 50 15 0 7.5 5 5 5 5 0 7.5 20 25West of England 25 30 50 20 7.5 7.5 7.5 7.5 5 5 5 10 25 25Average 17.13 27.8 36.39 14.84 7.03 5 4.84 4.38 1.43 2.01 2.31 9.88 23.25 tba

All 2002 and 2003 figures, with the exception of the Shipowners Club, exclude increases in reinsurance costs.

Willis Limited

Ten Trinity SquareLondon EC3P 3AXTelephone: +44 (0)20 7488 8111

Website: www.willis.com

GPC/0647/12/02 A member of the General Insurance Standards Council

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